LONDON, Nov 20 (Reuters) Oil rebounded from early lows to stand above a barrel on Tuesday, lifted by recovering stock markets on talk of yet another cut in U.S. interest rates to help ease a deepening credit crunch and shore up the economy.
The U.S. dollar fell to fresh record lows against the euro as talk of an emergency U.S. rate cut by the Federal Reserve, possibly as early as Tuesday, swirled in financial markets, boosting oil whose inverse relationship with the U.S. greenback has become more pronounced in recent weeks.
U.S. light crude for January delivery stood 98 cents higher at .62 a barrel by 1017 GMT after rising as high as .75, recovering from lows of .99 earlier in the session. Oil is still within sight of the record .62 record on Nov. 7.
London Brent crude rose 91 cents to .19 a barrel.
Market talk of the U.S. interest rate cut helped lift global stocks, with the MSCI's main world index rising up 0.3 percent after losing around 1.7 percent a day earlier.
Oil prices gained on Monday despite renewed jitters over mortgage losses and the prospect of a weakening U.S. economy that fuelled sharp falls on Wall Street and in other commodity markets such as copper and gold.
Escalating worries about credit market losses coupled with a drop in oil demand in the world's top user United States, where consumption has already begun to dip, have been major bearish factors for oil.
However, analysts say the oil market continues to find strong support from tightness in crude stocks ahead of the winter and little prospect of it easing any time soon.
''The reasons we are here (at over ) are still with us,'' said Harry Tchlinguirian at BNP Paribas.
An OPEC heads of state summit ended this week without an explicit commitment to boost oil supplies when ministers from the exporting group meet next month.
U.S. Energy Secretary Sam Bodman repeated his call for OPEC to boost output at its next meeting in Abu Dhabi in December, noting that crude oil stocks in OECD countries were about 100 million barrels below the five-year average.
U.S. weekly crude inventories are expected to have risen by 1.2 million barrels as refiners import more oil to meet pre-winter demand, a preliminary Reuters poll found.
The data is also expected to show a 500,000-barrel drop in distillate inventories and an 800,000-barrel increase in gasoline stocks.
REUTERS BJR HS1619